LEAD: Spanish Socialists to replace Zapatero in February

Nov 21, 2011, 14:02 GMT

Madrid - Spain's Socialist Party will elect a new leadership in February, Prime Minister Jose Luis Rodriguez Zapatero announced Monday, following the party's crushing defeat to the opposition conservatives in Sunday's parliamentary elections.

A party congress will be staged in early February to open 'a new phase' for the Socialists after their 'bad' election results, Zapatero said.

The party's federal committee is due to set a date for the congress on Saturday.

Zapatero has earlier said he is not seeking a new term as the Socialist Party's secretary general. Names tipped to succeed him include Defence Minister Carme Chacon and former interior minister Alfredo Perez Rubalcaba, who was the Socialist candidate for prime minister in Sunday's elections.

Zapatero did not, however, heed calls on him to resign immediately over the Socialists' election disaster.

Rubalcaba suffered a heavy defeat to conservative opposition leader Mariano Rajoy, who led his People's Party (PP) to its most resounding victory ever, taking an absolute majority with 44.6 per cent of the vote and 186 seats in the 350-member parliament.

The Socialists only took 28.7 per cent and 110 seats, their worst result ever.

'We had all the winds against us,' Zapatero said in a reference to the global crisis, which hit Spain particularly hard.

Many voters, however, attributed Spain's economic problems also to Zapatero's handling of the crisis.

Spain now has a record 21.5 per cent unemployment rate, the eurozone's highest. The economy is not growing and Spain is not expected to meet its target of cutting the budget deficit to 6 per cent this year from 9.2 per cent in 2010.

Spain's borrowing costs have meanwhile soared amid contagion from Greece and Italy, making it look possible that the eurozone's fourth-largest economy might need an international bailout.

There had been hopes that Rajoy's strong majority would calm markets, but that did not happen, with the yield on Spanish 10-year-bonds going up on Monday.

The Madrid stock exchange's Ibex 35 main index was down nearly 2 per cent at midday.

Rajoy needed to dispel the ambiguities of his election programme and to appoint an economy minister as soon as possible, the daily El Pais and other commentators said.

The formalities of transferring powers to a new government should be accelerated in Spain's 'unusual' situation, PP representative Soraya Saenz de Santamaria said.

In addition to having an absolute majority in parliament, the PP also governs half of Spain's municipalities and 11 of the 17 semi-autonomous regions.

That gives Rajoy more power than has been held by any other premier since Spain became a democracy after the death of dictator Francisco Franco in 1975, commentators noted.

At the same time, Rajoy only has a tight margin of manoeuvre in economic policy, with international pressure forcing him to implement unpopular spending cuts.